Zimbabwe to issue ministerial statement on Thursday on how to resolve the exchange rate problem


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THE DEPUTY MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHIDUWA): Thank you Mr. President. I thank Hon. Sen. Kambizi for the pertinent question. It is true that the issue of the exchange rate is an issue which we all know about. Our Zimbabwean dollar has lost value at the auction market. At the parallel market also, the Zimbabwean dollar has lost its value. We also have reports that shops are pegging the dollar at $250, some at $350 and some at $450. There are reports that some schools are even charging $500 per US dollar. As Government, if we look at all the laws which are there from the S.I. 127 which was put in place last year December and later incorporated in the Finance Act, it is illegal to use the exchange rate which is outside the auction rate.

We have discovered that people are using their own rates which are different from the auction rates. The question now is, who is determining the rates? In economics, we look at the fundamentals whether they are okay. Firstly, the printing of money distorts the rate. As Government, since November 2018 till now, we have not borrowed money from the Reserve Bank of Zimbabwe. We are surviving from what we have collected from revenue. This means that there is fiscal discipline and we are living within our means. As a result of the imposed sanctions, we are not able to borrow from other countries and we are going to survive with what we have.

We also have the issue of money supply growth. Looking at the current Monetary Policy Statement, in every quarter we pegged our supply growth at 5%, which means that money supply is not the one driving the exchange rate. Our interest rates are in tally with the inflation rates, which means that there are no people who are going to borrow money because of speculation. What is the cause of the  instability in the exchange rate? We do have what we call speculative behaviour and exchange rate manipulation. It is a word which I cannot describe in Shona.  In the past, we faced bad times and people’s fears are that things will revert to the bad times.  There are others who are manipulating the exchange rate and that has nothing to do with the fundamentals which I have already mentioned and said are in place.  Hon. Musabayana also mentioned that for our country to recover from where it is, it needs us as Zimbabweans to work together to resolve our problems.  So we need to produce as is always alluded to by our President.  We also came up with NDS 1 which focuses on production, road infrastructure and industries.  Measures are already in place to improve our production which currently stands at 68% from 37%.  This means the country is producing.  Even if we go to our supermarkets right now, you will notice that 85% of the products are locally produced.  In order for us to move forward,- next week Thursday,, we are going to give a Ministerial Statement on how best we can resolve the exchange rate issue.  We also have other measures but we cannot pre-empt them.  Those who are involved in speculation of rates are going against the law.  Our financial intelligence said they are waiting while following all the bank transactions.  There is nothing that we do not know about your transactions.  For example, a person with two million in their account, we can see all the transactions.  So for those making voluminous transactions and engaging in black market deals, we have sued about 200 companies.  Can we develop by manipulating the exchange rate?  How is it going to help us?  A country is only built through production. We are disadvantaging ourselves by manipulating the exchange rate and this will only result in a negative impact on prices.  We are the ones responsible for the high rates that are the order of the day.  We will bring a Ministerial Statement on the policies that we will implement, though I cannot pre-empt those now.  We are working on resolving this issue of exchange rates.

HON. SEN. KAMBIZI:  My supplementary question to the Hon Deputy Minister is that the explanation was bookish but the reality on the ground is that there is a lot of money on the street.  May the Minister please explain where the money which is being sold on the streets is coming from?  What does the country’s law say with regards to this activity?

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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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